Student Loan Bubble To Exceed $1 Trillion: "It's Going To Create A Generation Of Wage Slavery" And Another Taxpayer Bailout

While one of the biggest complaints of #OccupyWallStreet protesters, and much of the balance of middle-class America, continues to be the burden of student loans, the paradox is that, as the USA Today reports once again on one of its favorite subjects, student loans are set to surpass $1 trillion in total notional for the first time in history on what appears to be relentless demand and interest for this cheap form of educational financing, making this debt burden the single largest form of consumer debt, well bigger than outstanding credit card debt, and smaller only compared to mortgage debt. "The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards." What explains this insatiable demand for this kind of debt? Well, it's cheap, it's easily accessible (the collateral is education), and it is fungible - a student can take out a loan, yet use part or all of the balance for tangential purchases (that iPhone 4S sure would make me cool). But this, like every other debt, comes at a price.

Taxpayers and other lenders have little risk of losing money on the loans, unlike mortgages made during the real estate bubble. Congress has given the lenders, the government included, broad collection powers, far greater than those of mortgage or credit card lenders. The debt can't be shed in bankruptcy.

The credit risk falls on young people who will start adult life deeper in debt, a burden that could place a drag on the economy in the future.

"Students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married (and) having children," says Mark Kantrowitz, publisher of FinAid.org.

Naturally, just like in the credit bubble days, when NINJA loans were fast and furious, the lines in front of banks stretched around the block. Banks may or may not have known that the loans would be repaid, but nobody pressured borrowers to live in that big McMansion that "demanded" $1 down and a 99.9% LTV. Sure enough, when the day of reckoning comes, it is never the fault of the person who probably should have shown some restraint, but no: after all everyone else is doing it.

Well, it is the same thing now. And with generations of people indoctrinated that only those with a college degree can be successful, it is only obvious that student debt is now the next big bubble.

"It's going to create a generation of wage slavery," says Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers.

Full-time undergraduate students borrowed an average $4,963 in 2010, up 63% from a decade earlier after adjusting for inflation, the College Board reports. What's happening:

A key reason why a preponderance of the population is fascinated with the student loan market is that as USA Today reported in a landmark piece last year, it is now bigger than ever the credit card market. And as the monthly consumer debt update from the Fed reminds us, the primary source of funding is none other than the US government. To many, this market has become the biggest credit bubble in America. Why do we make a big deal out of this? Because as Bloomberg reported last night, we now have prima facie evidence that the student loan market is not only an epic bubble, but it is also the next subprime! To wit: "Vince Sampson, president, Education Finance Council, said during a panel at the IMN ABS East Conference in Miami Monday that lenders are no longer pushing loans to people who can’t afford them." Re-read the last sentence as many times as necessary for it to sink in. Yes: just like before lenders were "pushing loans to people who can't afford them" which became the reason for the subprime bubble which has since spread to prime, but was missing the actual confirmation from authorities of just this action, this time around we have actual confirmation that student loans are being actually peddled to people who can not afford them. And with the government a primary source of lending, we will be lucky if tears is all this ends in.

If nothing this is a fantastic exercise in observing a slow at first, then fast-motion train wreck from the side. It is without a shadow of a doubt, that not only will the student debt bubble pop, but writedowns on amounts outstanding will be massive, potentially resulting in another hit of 50% to total notionals, or about $500 billion. And since the borrowers will be fully tapped out, and the lenders will plead ignorance, and control the regulators and administration any way, is there any doubt who will once again be forced to pay for this upcoming bail out? This is something that does not require a college degree to figure out...

I read daily, but almost never post. I have been buying silver with my savings and I'm also a college student with student loans. I hope to make more money in the long run with the silver than the negative interest my student loans. I have a crappy part time job and I'm going to school to better my chances of getting a real career. I'm not paying any interest as long as I am in school. My plan is to finish my degree and then pay off the student loans as soon as I can so I don't get killed by the juice. I expect to make more than 5% on the silver so it looks like a win in the end, even if I dont land a career for several years.

1. Pay tuition and books with the loan 2. Use the left-overs for PM's 3. Sell some PM's if necessary to pay off the loans after I graduate before the interest starts. 4. Get a real job. 5. Buy a home after the financial apocalypse bottoms out real estate prices. 6. Laugh at at the other underemployed graduates who can't find a career either and tell them about the good old days when I bought silver for $33 bucks back in college.

Anyone see a problem with my plan? I'm a 27 year old, still living at home, back in college trying to get my BA. I know I am gaming the system but, fuck, if I could find a career, then I wouldn't be getting uncle sam to buy my silver for me.

You could be laughing at the other underemployed grads in the future but they are laughing at you right now for being 27 and still living at home trying to get BA. You have to discount that future laughter to PV.

Criminal Justice at CSU. I would like a career in law enforcement, but that seems as likely as getting a job in real estate right now lol. I spend more time reading sites like this then reading my text books.

The first thing you'll learn is that the concept of "justice" is non-existent, and the courts / legal system relies on plea bargaining and deals to make it work, and the only people making money are the lawyers and judges.

Here's a serious idea: if you're smart, interesting and motivated, look at spending some time in some funky places (Iceland is extremely cool, and full of... hmm... non-typical humans). If you're actually serious about CJ, look to doing a year placement in a non-US university1 somewhere with prospects. Aus / NZ might be a good idea.

Diversify and experience the world - 'cause the US world will not be a pleasant place soon.

1. Iceland will be crap for this - there's a 3-5 year waiting period to actually get into jail, and the crime statistics make the Oompa-Loompas look like serial killers

I read your response a few times and I think I understand: I should feel bad that I choose to live at home and try to better my future. You think it's my fault that I believed I could get a career, buy a house, and start a family some day. Well, I guess that was my bad, but I didn't understand that the generation before me was gambling with my future when I was 18.

Well done. Stay the course. Most have no long term plan, no real discipline and expect to be taken care of. Congrats on saving by living at home while you work and pursue higher education -- probably not the easiest thing to do, but by far the most fiscally prudent thing you can do. Take your folks out to dinner every now and then!! Glad to see some families actually helping and taking some responsibility for their own children instead of letting them be a drain on taxpayers (a foreign concept today).

If more people had your discipline the country would be in better shape. For decades I lived well below my means, saving and focusing on the long term and still giving away well above average to charity (as well as wasting a bunch on taxes) -- while those who made much less than me lived more extravagantly -- i.e., eating at restaurants or going to movies without a thought, bigger (not 2.000 sq ft with 4 kids) and nicer houses, nicer cars (not buying used), cable tv, cell phones, etc etc they even took more and better vacations.

If more families supported their own, us taxpayers would not have to take care of so many. You were correct in the laughing now vs later comment. I am not laughing, but I am financially very comfortable and unfortunately have reduced compassion on all of those who lived better than me for many years. Living below your means (and below the average of most) and letting things compound for a three decades really does help!

Don't let the entitled-victim masses on this site distract you -- press on.

Silver is money. When you say "make money" you are saying "make fiat," as in "I plan to earn a lot of fiat by playing around with silver."

You might earn a lot of fiat in silver long-term but this is all backwards.

Right now, in this environment, here's what's happening: the dollar is shrinking in value but wages are stagnant or falling. That means even with zero percent interest rates, your ability to pay down debt is shrinking year-on-year.

The borrowed dollar is shrinking along with the rest of the dollars but you are not gaining an offset in salary raises. It actually seems to me that the salaries are falling faster than the dollar and the number of remunerative positions is shrinking.

By positioning yourself as a borrower-and-spender (student) you are digging yourself into a hole the likes of which has rarely been seen. You need to be earning as much as you can ASAP and converting as much stored value out of fiat as you can.

I think I understand. I have to read this several times to understand it, tbh. So working part time, you suggest I pay off the debt with my pay checks rather than keep that debt on the books that costs me no interest right now? i've been just stacking silver and letting the loans chill. I was under the assumption that the debt would be easier to pay off as they print and the potential gains in silver would be off-setting the debt. I would only sell the silver back into the fiat to pay the debt off.

Sorry if i'm making you repeat what you just wrote but I dont completely understand. If anyone can link me to more information I would really appreciate it. I am a sponge right now for this type of info. Thanks

I would say don't delay getting into the workforce and working your way up. Go to night school for cheap tuition. Get some earning power and savings going now because the future is bleak. When the silver runs out you will still need money and the economy will only be worse four years from now.

Well, if silver collapses you'll be screwed or even doesn't go parabolic, you're screwed. I'm into PMs too, but watch out for the PM shlling on ZH. Remember, once you're holdig PMs it's in your interest to shill.

Your best bet is for OWS to win student debt forgiveness. The scenario you're hoping for in your plan is going to be a miserable world.

You're better off figuring out how to join up with your generation, which has been deeply and meaningfully fucked by the bankster/college/politicians, and demand loan forgiveness.

I hear you. I'm trying to play both sides of the field. PM's in one hand and the degree in the other. I have 20k in savings since I never moved out. I have 6k in phyz, 3k in Appl, 3k in gold and silver ETF's and I'll probably have -7k in student loans when I graduate in about a year 1/2. If the world goes to shit, I have the pm's, if the ponzi lasts for 30 more years I'll have a degree and hopefully a real job. I'm just trying to get out of this alive. lol

Well, if silver collapses you'll be screwed or even doesn't go parabolic, you're screwed. I'm into PMs too, but watch out for the PM shlling on ZH. Remember, once you're holdig PMs it's in your interest to shill.

Your best bet is for OWS to win student debt forgiveness. The scenario you're hoping for in your plan is going to be a miserable world.

You're better off figuring out how to join up with your generation, which has been deeply and meaningfully fucked by the bankster/college/politicians, and demand loan forgiveness.

Woah dude, I'm trying to get a degree, not learn anything. I don't know if any of you have been to a college campus in a while, but its about jumping through the hoops to get the piece of paper at the end. Then I can show it to my future boss to prove that I am good at jumping through hoops.

Blame the victims, right. Every kid knows that a college education is pretty much the entry ticket to a middle class lifestyle. For a long time this was true. But things have changed. The loans got more liberal in size and this allowed the colleges to raise their tuitions, and so they did. Tuition for a state resident at California State University is now $6000+/year. Twenty years ago it was $900/year. Top tier private schools are $40k+. These tuition levels can only happen because the financing is available.

Forcing young people into decades of debt just so they can have a hope for participating in their society about the level of fry chef or coffee pourer is completely exploitive. If you were 18 and had some ambition how much would you be willing to gamble in order to have a chance to make a career outside of fast food?

It was the job of the grownups of this nation to have the foresight to not allow its youth to go a trillion dollars into debt for their advanced education. So much for the grownups of this country. They've been gone for a while. Blanming the students for this is bullshit. They played the game they were they were taught to, worked hard, followed the rules. And now they're deeply indebted and in a terrible job market. It's not their fault.

Well. you can blame them for the ridiculous degrees they get for their $40k/yr. We are ass-deep in sociology, gender studies, etc. majors.

But, the inflation in tuition is, as you point out, driven by the availability of student loans. It's an obvious subsidy of Liberal academia from Congress via the little debt-enslaved kids.

And it is even more cynical than the predatory mortgage scams run by the banks and mortgage companies. In the old days, the kids could at least choose (like I did) to attend a state university and try to work their way through. Now even these are so expensive they require loans. They have no choices now. You can skip a mortgage payment every so often. Try that with a university.

Exactly, but the crux of the matter is the endless securitizations going on -- be it the mortgages, corporate loans, student loans, auto loans, credit card receivables, etc., etc., etc. --- they will securitize everything so they can continue peddling their securitzed debt (i.e., worthless credit derivatives, numbering in how many thouands of categories now? I've lost count although I used to know over 3,127 by heart!).

They gave us the last Great Crash of 1929 with it, and after 2007-2008, they won't stop until everyone is reduced to serfdom!

(Research Samual W. Straus, circa 1909, and mortgage pool certificates, etc. -- each time it has been a seven-year run before the meltdown -- not sure why, but perhaps it takes seven years before enough of those bankers not involved realize what's transpiring, and then the interbank lending freezes up.)

People should know better then take out a massive loan for a degree in anything these days since we are in a deflationary death spiral. Same credit bubble with housing, stocks, ...these all collapse when you buy something you cannot pay for.

My wife's grandfather is 98; lived through the Great Depression, and can't believe how out of control our 'borrow and spend' society is. He remembers the days when if you didn't have the cash; you didn't buy.

Like our government, so many 'average' Americans are so deep in debt, they have no possible way to get out if they (even temporarily) lose a job. Hate to quote Buffet, but he was right when he said: "You can't see who's swimming naked until the tide goes out."

When the deflationary collapse comes, cash will be king once more.

Inflation may slowly eat away at the value of a currency, but deflation is the Destroyer of Worlds, and the default on all that debt will be the biggest deflationary event the world has ever seen...

I'm not a Luddite but my tv is still a CRT. I don't care. It has increasingly less utility to me in general anyway. Soon I won't need it at all. I drive a '97 Corolla because it still works just fine. I'll buy a new car when the present one is no longer serviceable.

On second thought, maybe a used car. One that doesn't yet have a black box to record my driving habits, or listen in, or watch.

Way back when, before the Great Depression, it was only the very wealthy who attended college. What that meant was some really smart cookies remained in their hometowns and became master carpenters and master plumbers...or in an earlier era, accomplished blacksmiths/iron workers/tool makers/mechanics. Point being, the brains stuck around and contributed in all the lower levels or important hands on stuff in their communities. Folks didn't/couldn't leave home to go college and become lawyers, bankers, accountants (never to return). I kind of think that, in some important way, pushing everyone into college caused a brain drain in everyday life.

I am starting to rethink "lower level"- I know pub. co CEO's who have to workout at 2am because they dont have time, then back into work at 6am business travel all over the place- and they make 600k a yr pre tax, no grossup- stock options are ok but nothing to write home about (500m mkt cap company).

Or young grads fighting tooth and nail wanting to get into investment banking beating out hundreds of other applicants. Only to piss away their youth to work in large expensive cities, working min. 80 hour weeks for a 100k a yr. and getting burned out by 30, and or stuck in a job they hate, cause working on power points all day is really fulfilling.

I have also met small business owners like havac, plumbers, scrap yard owners, sheet metal distributors making a couple million plus post tax a yr for working 40 hours a week tops (and they can sell their business and they own it 100%).

Zero travel, zero board issues, no SOX complience, regulatory issues, blah blah blah and all the other shit you have to put up with and sucking investor dick when your earnings are off a penny this Q.

So really when the pub co's stock fluctuates 30% in a yr who is the smarter guy, also consider the avg. ceo's stay is 2 yrs and he leaves because the majority are fired.

From First Tier Toilet: "So, yes, occupy Wall Street, occupy Sallie Mae, but also occupy the authoritarian universities that are milking you dry."

From Third Tier Reality: "USN&WR lists the average student indebtedness - for those members of the GMU Law Class of 2010 who incurred student debt for law school - as $98,087. Fully 86% of this class took on such toxic debt. This figure does include student debt from undergrad."

From Temporary Attorney: "Pig Of The Year: UC Berkeley Law Dean Signs Letter Demanding Millions More In Pension Benefits"

If you have a good relationship with your parents ask them to take out a second mortagage on their home, use the money to pay off your student loans, and then make payments back to them at these current low rates instead of the 7% they locked you in at on your student loan. This makes your payments cheaper and gives you/your parents the ability to default if you feel inclined to do so.

Once again cheap, government backed money with good intentions fuck things up. Easy loans means colleges can jack up tuition at hundreds times the inflation rate since students can cover the increases via easy loans. Easy loans means for-profit universities can recruit students that have absolutely no business in a college class...pump them full of government loans...pocket the cash then kick the student to the curb or at least graduate them with a degree that's worth shit. Easy loans mean that banks once again get to make billions off the public with no risk.

This doesn't collapse all at once but in the end it's just one more giant fucking anchor around the US public's neck that will pull us down when the shit hits the fan.

Cheap???? 6.8% ain't no cheap! It's almost twice as expensive as mortgage rates and car loan rates. That's a huge part of the problem - over the last 5-6 years, government made student loans EXTREMELY EXPENSIVE.

Easily obtained, tax advantaged, government subsidized credit will cause a bubble in just about anything. I feel terrible for the students and their parents who failed to figure out that there is an enormous tuition bubble that has formed over the past 15 years.

Easily obtained, tax advantaged, government subsidized credit will cause a bubble in just about anything. I feel terrible for the students and their parents who failed to figure out that there is an enormous tuition bubble that has formed over the past 15 years.

i tried to telling all in my family, wifes sides more blue collar and my side more white collar, to skip college and i was yelled at and told i am an idiot (with a college degree by the way).......i knew college was a waste back in the 80s when i only had to pay $7000 a year........i understand the students not having a clue, but what are these intelligent but apparently braindead people thinking.....and after seeing the kids come home for summer break, i can see the strain in the faces.......i know what they are thinking and its not good

dont know how cool it will be, but no one wants to be known as the fool.......and paying will be the fool........think it may already be here....kind of see with my buddies no one wants to 100% admit it but are starting to give hints that we all know what the others are doing......i can see by next fantasy football season , it will be the talk of the draft and picking michael vick in the first round will not be the biggest joke of the day, but anyone still paying their debts will be picked on all day.....i dont plan on being that guy

As a former finance profession­al, I tell you YES, the system is predatory, rigged against the middle and working classes, and the time is now to collapse it.

Wide-scale DEBTORS’ REVOLT — DEFAULT-EN­-MASSE is the answer, or at least part of it.

The fact remains that the black hole of debt will destroy the working and middle classes. These “contracts­” are not inviolable things; they were made during a *different era*, a *different economy*, and the ability to pay them back has evaporated­. Therefore, cancel student and other types of predatory debt, or the revolt en-masse will occur, and soon.

The momentum grows. Join us. Walk away from your debt instruments and help speed up the desirable collapse of the predatory banking system. Rebuild from there, under fair rules – responsible capitalism that recognizes the need for a economically strong workforce and middle class.

...And to the folks who will immediatel­y answer with "pay what you owe. end of story!", let me just preempt by answering that the analysis is more structural and macro in scope than that. It's not just a matter of whose "fault" it is - regardless of that, it's become a macroscale systemic distortion that, if allowed to continue, will prevent any sort of mobility in the long term. We, as a nation, need to simply suck it up, recognize that these contracts were made in what is essentiall­y a different economic era, and recognize that they are incompatib­le with the new situation. It has to simply be zeroed.

And yes, it will cause widespread systemic collapse, but this will be temporary, we will adjust and rebuild, and will have cleansed out the massive DISTORTIONS that currently plague the system.

If half of those student loans cannot be paid back, and they have an average interest rate of 8%, and it's on average 40 years from end of studies to begin of retirement,then the to be garnished SS payments amount to $0.5T * (1.08)^40 =~ $10.8T

In other words by giving them $0.5 Trillion now, you have reduced future SS payments be $10.8 Trillion!!!

What an act of genius! Do we still have any unfunded obligations in SS, when taking that into account?

Read, digest, realise the issue. 'Stand on Zanzibar' will help as well.

The central issue for mice is the point where there are more mice than productive jobs to fill. At which point you get 'the beautiful ones'1 and 'loner females'2 and so on. I'd throw out some serious (human) studies, but as 'we're all agreed' that sociology has no practical use (apart from, you know, FaceBook et al) then it might be time to catch up. Srsly. Oh - serious point. The 'humanities' are actually important to study. Otherwise you can live like China, and forget the Renaissance. Top tip: money is made in many ways, and we're fast approaching the point where the service industry is no longer applicable, and the manufacturing industry has more applicants than processes. Ye Gods, most of you are fucking dinosaurs.

Hint: When posting, please remember that you're being involved in a metric assessment of a tiny niche of the intarweb, and as such, may be being made subject to analysis that you might not understand.

There wont be any "losses" as the loans are held by the dept of education. The federal gov has taken over the student lending market. If anything the borrowers will be paying interest in perpetuity until they die as these loans are nondischargeable in bk. Unless they all skip town and stop paying. But there wont be losses in the traditional sense as the banks sold their student loan portfolios to the fed gov (taxpayers)

Finance 101: Every loan is only as good as the cash flows that are paid against it. If there are shortfalls, in either interest payments, or maturity repayment, there are losses. Everything else is semantics. The only question is who funds these shortfalls.

As one of several "scambloggers" Ive been bashing the education complex for some time. Unlike my colleagues, I have a decent understanding of markets. So here is the question: where does the money come from to make the loans? Is it taxpayer rev that goes to dept of ed that then gets funded to the schools to pay teacher salaries? Or is leverage involved. This would be a great piece to make.

The money comes from future earnings. Kinda like pensions, in reverse.

To explain a little further: 'student loans' are akin to the buy in at a poker table. You agree to the buy in on the understanding that a) you've a place at the table, b) you've enough chips to play (thus - the better the uni, the larger the buy in) and c) the table is a straight one. You play your hand, on the understanding that the table is financed by society and that you're playing against your peers. Sure, some of your peers have a large stack from prior tables [inheritance] but you reckon that smarts and your ability to play certain hands others cannot guarantee a certain % of hands you'll win.

c) is where it fails. Apparently we live in a 'meritocracy' - the problem is that the real players aren't playing poker, they're running the fucking casino, and the house always wins. Not only that, they own the chips, the drinks, your suit and everything else in this little fantasy, and you've bought it ALL on credit.

What I'm asking is where does the money come from to FUND the loans in the first place. Because the growth in student loan debt is larger than the budget for the dept of education which in 2010 had a budget of 50 billion. There is of course private lenders that are in the game but they are small players.

An incredible 121% gain under the Oblahma administration. This fucking psycho spends money like an Orange County housewife on coke and prozac. But still, student loan debt is growing at a faster pace than the DOE budget, especially net of salaries and other expenses. Im sure there is a bunch of off balance sheet accounting that is taking place left and right. The lunatics have indeed taken over the insane asylum.

As I said: future earnings. Or did you miss how the bond market works? Same shit, my friend.

Oh, and I'd get a handle on the private industry that has a hold on 'accelerating' said debts [i.e. increasing the % on default] - all the same crooks.

Or, er. Laymans terms?

The money is invented as a profit side balance on a spreadsheet they don't expect to pay for, for the next 20 years?1. The deal is simple: we are betting X billion that Y people will increase the economy by X+Z (where Z is a facet of inflation, interest earned on said loans, international GDP - a certain % (X-10%) of defaulters) and so forth.

Education has always worked this way - what HAS changed is the massive private side profits being charged on the loans / defaults, coupled with Government legislature to prevent those taking them ever defaulting... plus the insanity (which is OBVIOUS) that a student / semester is taking on 10% of a lecturers salary, and s/he is teaching 20-100 at a time2 Top tip: Stop listening to these retards blaming it on the lecturers, the Uni's are making stupid cash on this.

ER - wait. Didn't I see the University of Texas taking delivery of a shit tonne of gold recently? Yes. So stop blaming the peons [uni lecturers] this shit is way bigger than that. Oh.. wait. Did your Sports PE coach just earn over $2 million and every other department earn about $75k? Yes?

THEN SHUT THE FUCK UP ABOUT EDUCATION UNTIL YOU UNDERSTAND THE CORRUPTION AND WHERE THE MONEY COMES FROM.

/fucking retards.

Hint: it isn't shitty left wing degrees costing the cash, its the fact that sports > all, and that MBAs make all the money.

The money is invented as a profit side balance on a spreadsheet they don't expect to pay for, for the next 20 years

So the fractional reserve banking process "creates" the money to fund the student loan account. Bank sends money to school account, school takes tuition fees and funds the rest to the student (surely you know that grad students can borrow for "living expenses"). I have student loans and make payment each month to the dept of education as they have purchased the loans from Citibank, the original issuer. At some point in this game there is an exchange of funds because the banks no longer own the notes.

On a side note you must be a teacher given your hostile response about professor salaries.

And no, the simplistic equation that "teachers must be jealous of university lecturers because they are both a socio and economic tier up from them" is a pathetic fallacy.

I'm neither. The fact you accused me of that means you've not a) read many of my responses to threads and b) are a fuckwit bunny expecting that every mother fucker out there defending your squalid little country is involved with it.

To the rest of your despicable response:
Attorney, 70k ish per year. Practice in long beach, off broadway and pine. Come down for a beer and a pimp slap bitch. Been here on zh from the beginning you senile fuck

For the record, I didn't junk you - I think there was a drive-by junk of both sides.

In retrospect, I think I misunderstood your point. Or rather, I got tired of you attempting to lead the witness and get an answer you had already decided on, which wasn't what I was discussing really. Lawyer... if I come for that beer, can I get a waiver against any criminal damage charges we might get involved with?

Endowments are where the real $ is for the Universities - but the entire process is a vast scam at this point [for instance, reference books in their 13th iteration that cost the earth, and collusion to prevent the cheaper 12 editions being used by a course written into the publishing contract]. Anyhow. Quick answer: all the money is a proviso of future earnings. Taxed in advance, via the loan. The old way was that 'the better the education -> better job -> more taxes paid on bigger earnings', i.e. the old Oxford / Cambridge system. The state provided a certain % of University costs on the understanding that better educated workers created more wealth, and therefore could be taxed at a higher rate.

What's changed, ironically, is that the whole system has been 'democratised' and made purely capitalist, and the US has given up on taxation. Everyone involved (some more than others - i.e. loan companies who also own the default / baliff companies, the publishers / holders of copyright on papers) is gouging the students, and putting their costs into the loan (thus inflating the size of the loan).

I've also no hostility to University lecturer's salaries at all - you totally mis-read my point, which was that 'tenured professors' are usually used as a scape-goat for why these loans are so large, when their actual contribution to the package is tiny in comparison with other costs. Which is why I saw red, as you seemed to be blinkered in what you expected the response to be.

Please watch this video series by Helmut Creutz who authored "The Money Syndrome"

Financial assets accumulate exponentially as a consequence of the compound interest effect.

The indebtedness of private and public households and the economy must grow correspondingly, as financial assets must flow back into the economy as credit.

Interest flows grow similarly in the course of escalating financial asset and debt accumulation. However, financial assets are unequally distributed.

Consequently, the escalating interest flows reallocate capital from those parts of the population that pay more interest than they receive to those that receive more than they pay.

The divide between the rich and poor widens.

Economists and politicians only regard economic growth as a solution to prevent the divide between the rich and the poor from widening.

However, given the finite resources of this planet, constant economic growth – demanding a perpetual increase of production and consumption – is ecologically unsustainable.

Above all, The Money Syndrome not only provides an in-depth analysis of the negative effects of constantly positive interest rates, but also presents a solution: Stabilize the monetary flow by introducing carrying costs to money, as argued by Silvio Gesell.

You have to love how through subsidies Uncle Sam has enabled the cost of housing, education and healthcare to inflate beyond most people's ability to pay and their 'solution' is to try and push the price of all these things even higher.

We all know the moral hazard brought about by medical insurance. Eventually medical costs skyrocketed as long as insurance was (back in the days) relatively affordable. Well, same thing with low interest rate educational loans. The perverse effect was to drive college and university costs to the moon, so that, except for the very rich, students were forced to take on debt they could not afford if they wanted an education. This applies to wastrels and industrious, hard-working students alike (it rains on the just and the unjust). I think we need to take into consideration this perverse effect on driving up costs.

Is there a name for this effect? I know it's called inflation, but that does not explain much. Underlying even inflation is the thought that sellers have that they now have license to raise prices and thereby make a higher profit, because inflation gives them "cover" to do so. I feel this side of the inflation equation is hardly ever mentioned--the side where there is a kind of collusion or even theft involved. The same thing applies to medical costs and education costs. This surreptitious raising of prices I believe plays a big role and, indeed, an enormous role in the case of medical costs and educational costs. Thankfully we must pay out of pocket for food!

The other side of the equation, at least initially, is that the buyer, in effect colludes with the seller in the presence of insurance or cheap money--there's an "I don't care about the high cost--insurance will pay for it" attitude.

One way to stop the increase in education inflation is to prevent government student loans from being used to pay athletic costs. My tax dollars should not be used to build a new stadium or pay coaches $1MM salaries, etc.

I think these student loans are about to be a thing of the past, as are the over-priced University degrees. If I was advising a young person today, I would say get a part time job, then go to a trade school to learn an actual skill they could use to get more reliable work in something like welding, plumbing or machining. They could always go back to school at some point in the future if they felt it was really necessary. The kids coming out of higher education with BA degrees and loads of debt are going to be facing a real uphill battle unless they get extraordinarily lucky. University might be worth it if you go to a good school, work hard and come out on time with a degree in something high tech, geology or energy related engineering. Those are the sectors that still have a chance at growth. Government, healthcare, finance, and law are oversubscribed and I can't see growth in those areas given the reforms likely coming soon.

Very thoughtful comments and likely correct. Way too many lawyers; doctors can never pay off their $500,000+ in debt and under managed care have crappy lives with too many patients whom they can only afford to spend 15 seconds with each. As for we finance people, it surely it has never been more important to be financially literate to survive in the world, but as for making a living...let's just say I'm glad I can fall back on tutoring kids, diagnosing and fixing PC's and small gasoline engines and playing guitar in a band at night.

Holy fuck, that economy is about the explode. All the oil and natural gas is opening up there. That means they will need to lay infrastructure for the movement of goods in and out of the region (roads, piping). They will also need goods and services for the oil workers. If I was anywhere near the region, I would be looking at opening up some housing, bars and strip clubs like crazy.

If you are looking for a skilled trade, welders will be in high demand for pipe lines, construction, and drilling machinery. Welding training programs are relatively short and inexpensive. Good welders make a good salary, and you have potential to start your own contracting company in the future.

How many people here know that student loans are the only debt that is collectible from your Social Security check? Yup, even the IRS won't touch your SS. But Sallie Mae will take that last dime from your cold, dead fingers.

I recruited college kids for the military for the last several years. Here is the deal:

1. These kids don't care what they sign when it comes to loans. Many don't even know what they owe. The money will "take care of itself". Of course, it doesn't. But try telling that to these Eminem wannabees.

2. They go to schools without ANY regard to cost, and where they will have the most fun going to footballl games, etc. They often go abroad for what is essentially an extended vacation. And they will be paying for those fond memories for DECADES to come.

3. Despite being academically gifted, many of them do not understand basic exponents, and that interest NEVER sleeps. They are usually surprised as to how quickly the loan amount grows. And terrified once they figure out what they did to themselves. And for how long they fucked themselves.

4. Parents are USELESS. They are ignorant of basic personal finance, and cannot tell junior or princess "no". Plus they let their kids get bullshit degrees like political science, religious studies, etc. etc. No matter, as the kids are all products of divorce, and they do not give parents any credence anyway because mom (and step-dad) can barely handle their own lives. We know this, and marketed accordingly....with tremendous success. Usually when I write this, someone gets hurt and pissed. If this applies to you, then STFU. I don't want to hear how you life turned out so great in your blended family. Believe me, there are tons more whose lives did not. The truth hurts, so deal with it.

5. Much bad press is being made about "for profit" schools like Univ. of Pheonix. NEWS FLASH: The public universities are WORSE, as they claim to be for the "public good" when in fact they are thieves. I saw things behind the scenes with these schools that would make you puke. They are much like Goldman Sachs.....seriously.

If you are interested in the LONG VIEW of economics....this article is the most salient one that you will read. The kids graduating college today are already saddled with a de facto car-loan for 10-20 years, a.k.a. STUDENT LOAN. And that's if they are lucky. Many already owe what would normally be considered a MORTGAGE, a.k.a. student loan. And this is even before they get married, buy a house, etc. etc. On top of this, many of them already have medical (esp. psychiatric) bills to pay, even if insurance covers some of it. YOU HAVE BEEN WARNED.

Saddle them with too much debt and no job capable of paying it back. Their only choice becomes the military, where there are student loan payback programs (last time I checked). The military (speaking from experience) likes the smart but naive (which are the typical suckers coming from college either graduates or dropouts). Do you think this is a coincidence?

Try joining the military today......you won't even get a call returned. Besides, nearly no one qualifies to join because they are too fat, on meds, etc. The military is packed, and getting rid lots of people now.

Government backed student loans should go to areas where we are weak. Math,science and medical. Thats a wide range.
Business, economics, history, poli sci ,law or crap like sociology and humanities should not get government backed loans.
Arts have their own scholarship systems- schools can offer their own scholarships for the above list of non- qualifiers.
We don't need an army of financial innovators, lawscum and sociologists and government should not encourage it

But the government is sorry for the bankers. So sorry that they pay for any and all losses.

That is the crux, the root, and the soul of this issue. It's also the point. If the government has paid for these loans that are in default, then why do the debtors still have to pay? The taxpayers don't get that money back. It fucking disappears. Guess who's pocket it finds its way into?

A mass default would show those guys a thing or two about their fucking student loans. Graduated 12/2006 with 70k in debt.. no biggie, right? LOL As of today the balance is 163k. Something is FUCKING WRONG!

EXACTLY. Please spread the word: mass default is coming. We are trying to speed up this process, make it *intentional*, put the power back in the hands of the debtors. We are only slaves to the predatory lending system because we allow ourselves to be. If a critical mass of us would just default en masse (I and many others already have chosen this route, for both strategic and moral reasons), the predators would become our prey.

DEBTORS' REVOLT -- DEFAULT EN MASSE. Everyone grow some balls again, refuse to play their game any longer, an just *default.*

Kill the cancer. Starve the cancer of its nutrients. Rebuild from there.

As a former finance profession­al, I tell you YES, the system is predatory, rigged against the middle and working classes, and the time is now to collapse it.

Wide-scale DEBTORS’ REVOLT — DEFAULT-EN­-MASSE is the answer, or at least part of it.

The fact remains that the black hole of debt will destroy the working and middle classes. These “contracts­” are not inviolable things; they were made during a *different era*, a *different economy*, and the ability to pay them back has evaporated­. Therefore, cancel student and other types of predatory debt, or the revolt en-masse will occur, and soon.

The momentum grows. Join us. Walk away from your debt instruments and help speed up the desirable collapse of the predatory banking system. Rebuild from there, under fair rules – responsible capitalism that recognizes the need for a economically strong workforce and middle class.

...And to the folks who will immediatel­y answer with "pay what you owe. end of story!", let me just preempt by answering that the analysis is more structural and macro in scope than that. It's not just a matter of whose "fault" it is - regardless of that, it's become a macroscale systemic distortion that, if allowed to continue, will prevent any sort of mobility in the long term. We, as a nation, need to simply suck it up, recognize that these contracts were made in what is essentiall­y a different economic era, and recognize that they are incompatib­le with the new situation. It has to simply be zeroed.

And yes, it will cause widespread systemic collapse, but this will be temporary, we will adjust and rebuild, and will have cleansed out the massive DISTORTIONS that currently plague the system.

JPR, see my post above. I agree with you wholeheartedly, but this won't work. One thing I have learned over the years is the near-supremacy of CREDIT SCORES. This has turned into the biggest con job of all, as it affects EVERYONE with almost no exceptions. Jobs require good crdit scores. Rental apts, car insurance, and on and on and on.......no credit score = poverty. Period. I don't like it, but that is what is going to keep these debt serfs in line.

Which is exacly the point of the DEBTORS' REVOLT itself, Dingleberry! We need to directly attack the predatory system and its mechanisms of control, one of which you describe here. Collapse the predatory system itself, and re-write the rules.

Good thing that all of these systems are made up via consensus of a small group of "decision makers"; the bad part is that we need to convince the proles that the system they're programmed to isn't all that great.

Changing systems isn't the hard part: getting people to act is the greatest challenge. Demagoguery plays a great part in coercing the masses. Who wants to be tethered to debt they were socially "programmed" into accepting? The system ends if enough of us tell the collectors of made up and inflated debts to go fuck themselves.

Understand, UNDERSTAND that what IS REAL is the physical: Nations and ideologies and debts and values are all subjective--they all exist within the construct of our own minds: we pretend that nations are some physicality--that our buildings and streets and markets are somehow physical representation of the mental construct--but they are not. What they are representations of is a universal human desire for "advancement": People who worked built those things: people who worked jobs to get ahead in life laid those roads--for themselves, or for their kids, or for anyone else they cared about. People took loans with the promise of a future--not a contract to give blood to a vampire parasite class.

The power to "alter" these subjective-objectivities rests with us, if enough of us WILL IT TO BE SO.

Crash the system--2012 is a fine year to do it, too, donchya think? Stand to the face of the beast and spit upon it.

Not because we are a bunch of "lazy bums who don't want to pay our debts," as the morons will frame it. No, it's because we WANT to pay our debts, we WANT to have a productive future, and realize that the collusion on finance and government has created a predatory, immoral system that renders this impossible.

Sure, people can rant all they want about our "responsibility" to "pay our debts" to the predator class that has ruined our futures. I say: no, repudiate this, fight, and give them DEBTORS' REVOLT. We are coming.

There is not a lot of point in trying to affix blame for the current situation.

There is not, either, a lot of point in going through the excruciating intellectual exercise

of laying out a blueprint for repairs.

Empires are like people. They have a natural life cycle. Once they reach the top of their game, then they go into inexorable decline. Its better, though, if they do it quickly. Just ask Tiger Woods ....

And many a man whom fraud or law had soldfar from his god-built land, an outcast slave,i brought again to athens; yea, and some,exiles from home through debt’s oppressive load,speaking no more the dear athenian tongue,but wandering far and wide, i brought again;and those that here in vilest slavery crouched ‘neath a master’s frown, i set them free.

Banks may or may not have known, but no one forced the young to take a loan. The taxpaying rich will be forced to bear the bailout. Give me a fucking break. You post all day every day on the banks involvement in this mess and the dismal employment numbers. I'll be taking my low paying job, work overtime, whatever, I won't ask for help from anyone. But I will not let anyone tell me that I deserve to live the rest of my life in abject poverty and slavery because at one point, I thought I was making the responsible decision by making an investment in education.

I think this analysis misses the point. It's not lending frraud, it's education fraud. The key problem is not debt - it's the poor education provided by the vast majority of US colleges. "Indocrtrination that you need a college degree to get ahead" is no indoctrination at all - it's just simple truth in 21st century in a global economy (unless you want to work for $5 a day). But charging 40K a year at a 3rd-tier college that teaches you almost nothing - that's the real problem. Such a thing should cost $5K a year at most. A student is, by definition, too young and inexperienced to be able to tell good education from bad. And an army of crappy universities are simply preying on this inexperience. So, the quality of education and perhaps education prices should be regulated, before the student loans are.

Additional big current problem is the high rates government charges on student loans. Right now it's almost 7%. In the economy where the rates are 2-3%, 7% pretty much kills. So, there's not even much need for "debt jubilee" - it's sufficient to re-finance these loans at 3-4%, for a recent graduate's cituation to change. And it's cheaper to do than a full-blown "jubilee".

Ivies are not a problem by themselves. At some point in my life, I decided against an Ivy engineering school in favor of a relatively no-name engineering school in town, simply because the latter was BETTER and higher in rankings. The real problem is when they sell you a LEMON EDUCATION for 40-50K/year - no matter if it's Ivy engineering school, or SouthParkU English Lit & Dancing school.

This has to be regulated. The whole Universities, and individual schools within them can, for example, be given grades. Then you would think twice before paying a "C-" or a "D+" school 40K/year. But maybe you'll pay them $7K a year. And, anyways, if "C-" is the only school that accepted you, then perhaps you are not cut out for college, and should get into plumbing or farming, as many suggested here. But without a clear regulation and ratings, it's very hard to make correct choices, particularly when you are 18.

You state something as fact, and even if it isn't fact--even if it wouldn't happen any other way--if there's enough of a collective "want" for such a thing, those ideas will aid in forcing an eventual outcome. This is social engineering; this is my way of infecting minds. I openly state my agenda because I know I'm good at what I do. You think my ranting and raving on a blog with millions of pageviews is without purpose?

There will be a jubilee. Why will there be a jubilee? Because enough of us will want it.

I'm curious about something, incubus. If a jubilee were to be declared, would that technically be called "debt destruction?" And if so, does anyone have any ideas on what that would mean to the value of the FRN (if any)?

"The credit risk falls on young people who will start adult life deeper in debt, a burden that could place a drag on the economy in the future."

COULD? COULD???

What idiotic reporting.

I also have to echo what others have said. An expensive college education will be a terrible investment for most people. My own list of subjects to study (either self or night school) include gardening, carpentry, welding, gunsmithing and reloading, etc.

Not if you major in a real subject and don't spend your loans on discretionary goods like most of the OWS idiots did. They think they're too good for real work. There's plenty of jobs out there picking fruit and mowing lawns if we ship all the Meheecans back. Something tells me little miss anthropology feels entitled to some do nothing job in Human Resources where she can unleash her sandy vagina upon the world.

Not seeing too many top tier engineering students crying about not being able to find jobs.

Engineering isn't a slam dunk either. It seems to be boom-bust around here, closely tied to cycles in military spending. Eighties: Military Boom. Early-mid '90s: Bust. Late '90s: Internet boom. Early 2000's: Bust. Mid-2000s to today: Military boom. What happens what the mil spending spree ends?

The point of the article is that the student loan wagon wheels are falling off, and that the whole post-Baby Boom American idea of paying 5 or 6 figures for an education with borrowed money has been accepted by a lot of young Americans, and as a consequence, the discretionary (and not-so-discretionary) spending of these young Americans, even as they hit their "peak" earning years (not so peaky today, but I digress) will be depressed for years (15-30) to come. Didn't borrow money for school? Majored in quantum electro-robotics or what not? Bully for you. But don't expect a recovery in the housing market anytime soon. Mistakes have been made by many, many people out there, and they will have ripple effects in the larger society. It's up to you to use that information to make good financial decisions. I, for example, will never buy a house with a mortgage. Period.

This is a tough one for me. It took me 14 years to pay back my student loans but it was brutal.

Why do we crush the very people who are our very best hopes for the future?

Yeah. Why? Because we live in a psychotic society that doesn't understand chalk from cheese. Shit from shinola. All education should be free. And all student loans should be jubilleed. With perhaps the proviso that they (the student loanees) do something for society in return.

If a bunch of faggot striver poors want to go way over their heads into debt to earn worthless degrees in anthropology and women's studies they have that god given right. What they don't get to do however is come crying about how they didn't get the job they thought they were magically entitled to just because they spent four years in prolonged adolescence.

Undischargable debt = institutionalized, legalized slavery. Maybe the vote of those with student loan debt should only be worth 3/5ths of a full vote, too.

LOL THIS.

The only thing left won't be tears, it will be ass-rape. Only solutions are: debt forgiveness or make them pay it. We know the gov't, slave to the BANKS, will make us pay it (whether its student or taxpayers).

A few months ago, my friend, a Holy Cross alumini, was shocked to hear what the tuition was at that Jesuit college. He graduated from that in the early 60's. Prices have gone up a bit since then.

He then opined that it would be a far better use of money to go to a state college/university than any private one. He also thought the major Canadian colleges were a better deal than anything you may get down here. Perhaps Concordia in Quebec isn't a bad place after all?

Well, I did my part in helping out America by NOT going to college. I have always said college is overated. Mostly due to the fact many of my peers that went are either living with their parents now or completly bummed out from life and debt. And then on to me... a fairly successful business man. Coincedence? Times have changed. College is forced onto teenagers and so is the 40-40-40 lifestyle.

40-40-40 = You work 40 hrs a week, for 40k a year for 40 years of your life.

Student loans are also a reaction to the increasing view that any job that doesn't have a high intellectual component has been and will continue to be outsourced leaving only "thinking" jobs and repair jobs in this country...haves and have nots people

The link down the page is for a spreadsheet which can be sorted by salary to see the highest paid on down. I'm listing a few below. Kind of boggles the mind but then nothing like this surprises me anymore...

also have to echo what others have said. An expensive college education will be a terrible investment for most people. My own list of subjects to study (either self or night school) include gardening, carpentry, welding, gunsmithing and reloading, etc.

Reallyu?? I am in the Boston MA area. Seems like there was never any recession here... Rents are at record highs in any town east of I 495 and college grads are getting multiple offers left & right even if they spent $250,000 to got BU or BC.

{{I also have to echo what others have said. An expensive college education will be a terrible investment for most people. My own list of subjects to study (either self or night school) include gardening, carpentry, welding, gunsmithing and reloading, etc.}}

Really?? there are tons of jobs in IT, Accounting, Finance & anything health care related. I know in the Boston area even with over 60 colleges, there is tremendous shortage of people for open positions...

{{I also have to echo what others have said. An expensive college education will be a terrible investment for most people. My own list of subjects to study (either self or night school) include gardening, carpentry, welding, gunsmithing and reloading, etc.}}

Really?? there are tons of jobs in IT, Accounting, Finance & anything health care related. I know in the Boston area even with over 60 colleges, there is tremendous shortage of people for open positions...

I have $90k in student loans from law school. I own a house with my husband, but there's no way I could have bought it without him! He has no debt and he had a downpayment saved up. Since I work for the government, the balance of my loans will be forgiven after I make ten years of payments. So I'm really, really looking forward to 2020! Having student loans is a real bummer. I even had to take out online loans a couple of times to manage the monthly payment, but for me it was worth the investment in my degree. I will make exponentially more money over my lifetime than I would have without my law degree.

Upon returning to my Alma Doesn't Matter the next year for a laugh, I noticed that the credit card companies in "frosh week," (Somebody might have noticed that irony, but alas...) had set up display booths, in order to lure in the "kids".

"Are they out of their #$%^ing minds? Giving university students, credit cards?!" I was surprised at my wisdom at that tender age.

Well, here we are, 25 years later, and look at the mess we're in, with most kids coming out of school, thousands in debt to just the cards!

And up in Canuckistan? Nobody cares.

One guy, a father of two girls, going off to college, commented on the lunacy of how his daughters had credit cards thrown at them.

"Hell, Herkimer! When I was a kid, I had my parents ready to co-sign a loan for my business, and the bank turned me down!" And his folks had the money to back him.

What the US needs is highly trained craftsman not more college kids with general business and liberal arts degrees. We have millions of kids with Business degrees that end up mid level paper pushers for businesses which should be filled with highly skilled craftsman. We need to demand more in how homes are constructed in America, the compressed sawdust homes of today are built with a 30-40 year life. We need homes like those in Europe that last 100-150 years. Homes that won't make our cities and towns look like slums in 30 years. Yes, they will cost more, but skilled laborers deserve a good wage. We also need to ensure that Corporations and businesses show a commitment to our towns, those that move overseas must pay the price even if it requires payday loans no credit check. Any company that moves overseas must be prohibited from selling goods in the US for a decade.

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